Self-generated goodwill in a new business is not a capital gains asset, so its transfer does not trigger tax.

Consideration for transfer of goodwill generated in a newly commenced business is not chargeable to capital gains tax because such self-generated goodwill is not an asset within the capital gains charging provision. The Supreme Court principle in B. C. Srinivasa Setty applies, and the earlier contrary view relied on by the Tribunal was disapproved on this point. The transfer of such goodwill therefore does not give rise to taxable capital gains.

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Issues: Whether consideration received for transfer of goodwill generated in a newly commenced business is liable to capital gains tax.

Analysis: The issue was covered by the Supreme Court decision in B. C. Srinivasa Setty. Goodwill generated in a newly commenced business is not an asset within the meaning of the charging provision for capital gains, and its transfer does not give rise to taxable capital gains. The earlier view relied upon by the Tribunal stood disapproved on this point.

Conclusion: The question was answered in the negative, in favour of the assessee and against the Revenue.

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